Grub is working, as the kernel tries to run. By then, grub has done its job.
The menu.lst and fstab files look correct too. They're pointing to the right places, anyway.
Which leaves the initrd.img (why I wanted to see the contents of /boot/) and the block node /dev/root. It also appears from the fdisk output that you have no /dev/sda or it can't make sense of it.
Please do the following and post the output (I'm assuming /mnt/tobe and /mnt/nottobe are still mounted):
mount -o loop /mnt/nottobe/boot/initrd-3.2.18-pclos2.bfs.img /mnt/tobe
ls -l /mnt/nottobe/boot/
ls -l /mnt/nottobe/dev/
ls -l /mnt/tobbe/dev/
I'm not convinced the /dev directories will exist in a non-running set up but we'll look anyway.
I know Texstar always used to say "We don't do RAID", but it seems many computers are now sold with RAID built in (in this case to get a 1TB drive out of two 500GB ones). I suspect the mkinitrd script doesn't detect the location of raid drives correctly, but I'm only guessing. This means your system could run from the livedvd but couldn't be installed with the wherewithal to find itself on your RAID discs.
Googling suggests there are numerous problems with dmraid support in Linux, partly because Windows often works with non-standard configurations... (Quelle surprise!)
I suspect the only way you'll get pclos to install and boot on your machine is to edit the mkinitd script in the livecd session to do what your system needs (whatever that is) before installing. There's not really much help we can give with that on the forum and it could take a long time. You could try other distros to see whether any of them will install and boot on your system and compare their mkinitrd with ours for clues, but otherwise I don't really know what to suggest.
You could try changing BIOS settings for the RAID, I suppose, but then that could clobber Windows and leave you with an unbootable PC.